The Impacts of Corporate Social Responsibility on Small and Medium Enterprises Performance

Abstract

This study investigates how small and medium-sized enterprises (SMEs) conduct corporate social responsibility (CSR) and how it affects their performance. This study used quantitative research with data collected from 138 manufacturing SMEs in Java. By using partial least square structural equation modeling, this study discovers that economic and philanthropic responsibilities have a significant effect on customer and employee performances, whereas legal responsibility has a substantial impact on customer, employee, operational and financial performances. In contrast, ethical responsibility does not affect any aspect of company performance. The findings also highlight that legal responsibility is the most significant predictor of all four performances, and economic and philanthropic responsibilities are the second biggest predictors as each of them has a substantial effect on one performance. The results also show that customer and employee performances receive the most effect from two dimensions. Customer performance is significantly influenced by economic and legal responsibilities, while employee performance is significantly affected by legal and philanthropic responsibilities. These findings can encourage SMEs, particularly in developing countries, like Indonesia, to implement CSR beyond profit maximization and compliance to achieve higher social and financial performance.